Article

Good for Business and the Planet

paper cutout illustration of a green landscape surrounding a cityscape with windmills and a bicycle
Contributing Writer

9 minutes

Credit unions find their values align with internal and external sustainability efforts.

Every business has always wanted to be sustainable in the sense of making enough money to pay its bills, employees and owners—so it can stay open and remain viable. 

But now many businesses, including credit unions, want to be sustainable in the sense of behaving in ways that will make it possible for our society to keep going. Their focus is external, to ensure they are not part of the problem.

Sustainable actions that CUs can take range from reducing energy use in branches and installing solar panels on their roofs to making loans that help members buy e-bikes to offering investments that don’t include fossil-fuel companies in their portfolios. 

Many credit unions find their sustainability efforts are a natural fit with their values-based approach and include their diversity, equity, and inclusion efforts as well. 

What’s Driving the Mindset Shift

At this point, the impetus for change is coming from CUs and their members, but increasingly regulators are looking at the potential transformation of our economy from one based on fossil fuels to one driven by electricity generated from renewable sources. Regulators are starting to quantify the risks this shift will pose to financial institutions. Some are considering insisting financial institutions hold more capital so they can handle any risks.

While there are climate-change skeptics and critics of specific proposals, most people think our environment is getting warmer due to human activity. The number of people in the U.S. who think global warming is happening outnumbers those who don’t by a ratio of more than 6 to 1 (76% versus 12%), according to a September 2021 report by the Yale Program on Climate Change Communication

In October, the Financial Stability Oversight Council, of which the National Credit Union Administration is one of 10 voting members, identified climate change as an emerging and increasing threat to U.S. financial stability.

“Some of the largest participants within the financial services industry have begun adjusting their business plans and have committed to achieving net-zero carbon emissions in their activities,” NCUA Chairman Todd Harper said in November. “The NCUA board recognizes that this is a business decision for companies of all types and sizes to make, including credit unions. For that reason, the agency will not micromanage auto lending, mortgage lending or member business lending for climate financial risk. This includes lending to family farms and others in the agricultural sector, as well as businesses tied to the fossil fuel industry.”

In Canada, the guidance may soon be more direct. The Bank of Canada and the Office of the Superintendent of Financial Institutions, which regulates the growing number of federal CUs, reported in January that, “meeting climate targets will lead to significant structural changes for the Canadian and global economies, and ... this transition will be more challenging in countries like Canada that have large carbon-intensive sectors.”

There is also international pressure coming from the Task Force on Climate-related Financial Disclosures created by the Financial Stability Board, Basel, Switzerland, a network of central bankers from around the world, to improve and increase reporting of climate-related financial information. Some CUs have already adopted the task force’s reporting approach. 

Pamela Agnone
Vice President
UNFCU
We found that every sustainable decision we’ve made has had a positive impact on the bottom line, and it’s resonated well with our membership.

United in Sustainability

A leader in the sustainability movement is $7.4 billion United Nations Federal Credit Union, which has had climate-neutral operations since 2016. UNFCU leads the United in Sustainability network and has organized four annual sustainability summits that brought together CUs across North America, the last two co-hosted with $287 million OAS Federal Credit Union

“We found that every sustainable decision we’ve made has had a positive impact on the bottom line, and it’s resonated well with our membership,” says CUES member Pamela Agnone, EVP of UNFCU and an executive sponsor of its Global Sustainability Program. 

“When we got to a certain point in our journey, we turned our attention to the credit union industry,” says CUES member Tom Kurian, VP/enterprise information security and program manager/industry, UNFCU GSP. 

UNFCU’s United in Sustainability website “contains a lot of resources and tools for credit unions and associations that are interested in in this topic no matter where they are on their journey,” says Kurian.

Given its field of membership, it’s perhaps not surprising that UNFCU has focused on meeting the 17 sustainable development goals established by the United Nations. Agnone says pursuing the SDGs “seems like a natural extension of the way we would conduct our business” for members.

The United in Sustainability website maps out five phases that CUs and other organizations pass through as they implement sustainable activities: 1) awareness, 2) consideration, 3) engagement, 4) integration and 5) advocacy. 

Starting Small Is Possible

$1.6 billion Self-Help Credit Union, Durham, North Carolina, first got involved with sustainability about 20 years ago when a few environmentally conscious employees started recycling and pushing for other improvements, says Melissa Malkin-Weber, sustainability director at Self-Help CU, a family of organizations that includes two CUs—Self-Help CU on the East Coast and $1.8 billion Self-Help Federal Credit Union in the West and Midwest—plus an advocacy group and a nonprofit loan fund.

Over time, Self-Help CU’s initial effort has turned into an organizational imperative. The CU’s goal is to provide services to low-income families and underserved areas, which is especially important since they are hardest hit by climate change and the least able to financially cope with it.

Malkin-Weber says that when she joined the CU 11 years ago, there was a reluctance to discuss climate change with members because it was controversial, so the focus was on talking about the cost-saving benefits of environmental changes. But now “it’s become clearer and clearer that climate change isn’t something that’s an if or when. It’s a here and it’s a now.”

She said Self-Help CU promotes the fact that it offers members “the opportunity to bank with an institution that doesn’t finance fossil fuels and that invests in sustainable energy projects and building more sustainable communities.”

Now, the organization is working toward setting ambitious goals for reducing its carbon footprint by analyzing and sharing data on its current footprint. 

“We have published our first public carbon footprint report  both for operations and for our loan portfolio,” Malkin-Weber says. “So, we shared our baseline, and now what I’m going to be working mightily on is figuring out how we can then reduce that footprint.”

The report outlines the direct footprint of Self-Help CU’s operations in 2020 and measures the footprint of its commercial loans. That footprint is many times the impact of the organization’s direct emissions, which highlights the opportunity for all financial institutions to work with their borrowers.

For example, $27 million Clean Energy Federal Credit Union is providing loans for solar panels, geothermal heat pumps, electric vehicles and e-bikes. Also, Inclusiv, based in New York, is working with a network of community development CUs to train lenders so they can provide loans for solar power systems. 

Self-Help CU also encourages members to adopt simple home energy efficiency habits as a way of aligning their habits and their values, as well as saving money.

The report notes that Self-Help CU is starting out from a greener baseline than many other financial institutions because it does not finance fossil fuels.

The CU’s policy of not financing fossil fuel projects is well known, so it rarely gets approached for plans that don’t fit its requirements. Still, a few years ago it did turn down the chance to underwrite solar arrays at a natural gas exploration site.

Instead, “we attracted projects that were not getting a hearing from the big banks,” says Malkin-Weber, “such as a land trust that needed a bridge loan so it could get a state grant or a biofuel company that needed a truck. We’ve tallied up ... over $409 million of green loans over the years through a mix of opportunistic and intentional targeting.”

Paul Herendeen
Director of Impact Market Development
Clearwater Credit Union
[Our] board approved a new strategic plan to make our core values the center of our business strategy. Making those values explicit really gave us license to push it to the next level.

Carbon Accounting Financials

Another leader in the sustainability movement is $855 million Clearwater Credit Union, based in Missoula, Montana. 

A few years ago, as part of a renaming and expansion program, Clearwater CU’s “board approved a new strategic plan to make our core values the center of our business strategy,” says Paul Herendeen, director of impact market development. “Making those values explicit really gave us license to push it to the next level.”

Clearwater CU is a member of the Global Alliance for Banking on Values and has worked with a small group of like-minded institutions, including Self-Help CU, to adapt the Partnership for Carbon Accounting Financials benchmarking initiative, developed in the Netherlands, to meet North American requirements. The program aims to allow financial institutions to assess and disclose the greenhouse gas emissions of their loans and investments. 

Clearwater CU has recently completed its first assessment under the program, and its board is considering how to proceed.

“Climate change is an issue that we care a lot about, and we don’t mind being public about it,” Herendeen says. “We’re always ready to finance any kind of energy efficiency or renewable energy work. We got to carbon neutrality by financing energy efficiency at a local affordable housing project, and we would really like to finance more of this work.”

ESG, vendors and staff $12.5 billion First West Credit Union, based in Langley, British Columbia, decided last year that it needed to include an outside assessment of its environmental, social and governance efforts in its strategic planning.

It turned to Sustainalytics, an independent ESG-rating firm, which found First West CU was at low risk of experiencing financial impacts from any of these areas. It ranked well below most other financial institutions. 

“As a values-based organization, we’ve always had environmental, social and governance issues at the forefront of what we do,” says Megan Long, director/strategy. “But we’ve never really formally measured it. That first official rating marks the beginning of our official journey to become a more sustainable organization.”

Now, First West CU’s leadership team is defining its path forward and considering ways to engage members “to make sure we are taking them along on this journey as well,” Long says.

Don’t forget your vendors, adds Kurian, because where you spend money shows your true values. He urges CUs to try the UN Global Compact’s free, confidential and comprehensive self-assessment tool

Sustainability efforts also can help you attract young staffers who want an employer that matches their values, says CUES member Prasad Surapaneni, CIE, SVP/CIO at UNFCU and an executive sponsor of its Global Sustainability Program.  cues icon 

Based in Campbellford, Ontario, Art Chamberlain focuses his writing on issues important to the credit union system.

CUES Learning Portal